DfID-World Bank Agricultural Public Expenditure Review Workshop

1. DfID-World Bank Agricultural Public Expenditure Review Workshop Christopher Delgado, ARD, World Bank On behalf of a multi-person team with special thanks to Mona Sur, Limin Wang, Pauline Zwaans, Saswati Bora, Robert Townsend, Svetlana Edmeades, John Byaruhanga, Stephen Mink, Richard Anson & country teams in Ethiopia, Honduras, Laos, Nepal, Nigeria and Uganda, and welcoming other colleagues in the common struggle Addis Ababa, May 11, 2009

2. A World Bank/DfID Partnership on Analysis of Agric. Public Exp. • Overview of issues and trends Literature surveys, trends work, input to WDR 2008 (with IFPRI and Oxford Policy Management) (2) Country case studies Selected by Project Steering Committee consisting of World Bank ARD, World Bank Regions, DfID, FAO, NEPAD Secretariat Carried out by WB staff, IFPRI and consultants funded by DfID in Ethiopia, Honduras, Laos, Nepal, Nigeria and Uganda (3) Tools development, dissemination and capacity-building Adaptation of specific tools, a living website and a tool kit

3. Why Bother?

4. To Have a Seat at the Policy Table Generally a need stronger capacity in analysis of PER for policy analysis, ability to participate in PRSP type discussions, and prevail in discussion with non-ag constituencies, especially for Ag Need to strengthen nat’l systems of data collection and monitoring Need to be able to analyze the impact of ag spending policies (a) impact evaluation of ag programs (focusing on incomes, poverty measures & benefit/cost ratios) (b) benefit-cost-incidence analysis to provide evidence on how well programs/gov spending target poor households

5. Improve coordination between the Ministry of Finance and the sector ministries in budget planning and finance Strengthen capacity of MOA in PER and policy analysis Harmonize figures presented by budget execution reports, economic and social plans to facilitate the evaluation of outcomes Accounting for decentralized expenditures and revenue Improve transparency and accountability of expenditures Especially off-budget expenditures funded by donors and overhead expenditures Purposes…

6. Combine preparation of recurrent and capital expenditures Maintain a ratio that that enables sustainable use of resources in the sector Allocation of resources within Ag Ministry can be better related to government policies Budget allocations necessary for policy implementation should be aligned to stated policy goals towards agriculture Ongoing evaluation of the effectivenessof public expenditure Using different tools: e.g. benefit incidence analysis, PETS More Advantages…

7. Issues

8. Core Questions • What is “Ag” PE?: UN COFOG definition of Ag PE • PE on crops, livestock, fish, forestry, water for production, ag land related issues) • Not perfect: ag credit? Ag policy institutions? Certain kinds of research? • Efficiency of PE: (counting “outputs”) • How much of PE is for public rather than private goods? • how much of what is budgeted is actually spent (low outturns) • Effectiveness of PE: (counting “outcomes”) • how much reaches those it is intended to reach (low leakages) • Incidence of positive intended outcomes related to PE (performance indicators)

9. Main Public Goods in the Agricultural Economy Agricultural Research Agricultural Extension Irrigation and Drainage Infrastructure Veterinary Services (some) Agricultural Statistics and Policy Land Administration Rural Infrastructure (roads, electricity, ICT..) (The last three are very important to impact of ag PE but in increasing order descending are not well captured in many definitions of agriculture and often not fully in Min Ag budgets)

10. Definition of “Agricultural” Expenditure Has Strategic Implications • e.g. Uganda, MAAIF = 4% of PE, but rural PE = 11% based on all rural (including infrastructure); • Some roads may impact ag sector more than Min Ag expenditure, but not all roads • Returns to some ag PE may depend on other PE • Involvement of different Ministries or even different donors hinders information flows and coordination for impact

11. WDR 2008 Suggests Public Underinvestment in African Agriculture in Particular

12. Source: IFPRI using IMF data

13. And Inefficiency….? (1) Allocations not going to sectors with highest returns for growth and poverty alleviation • High variation in benefit/cost ratios across sectors • Sectors with high returns for growth seemingly lower priority

14. More Inefficiency…? (2) Large amount of resources devoted to private goods (input/output subsidies) and services • Kenya: transfer to parastatals and subsidies from Ministry of Ag was about 26% in 2002/03 • Indonesia: subsidies accounted for 43% of fiscal support for ag in 2006 • Zambia: 80% of poverty reduction programs (which accounted for 42% of total ag sector budget 2001-06) devoted to Fertilizer Support Program (FSP) and FRA.

15. 7 6 5 Percent of Ag. GDP 4 3 2 1 0 1975-79 1980-84 1985-89 1990-94 1995-99 2000-02 Crowding OutSubsidies are now four times larger than public investment in Indian agriculture Subsidies Public Investment Source: WDR 2008

16. Not Enough for Staff to Work With to be Effective… (3) Wrong composition: not enough capital and operation and maintenance (O&M), too high a share of wages • Evidence shows effectiveness of ag services adversely affected if wage share exceeds 60% • Scarcity in O&M spending particularly severe in irrigation, resulting in poor service delivery: • e.g.: Turkey: 24% rural spending in irrigation, recurrent share is 44%, O&M only 2% of recurrent spending

17. Donor Finance Often Extra-Budget • Donor financing often not captured, off-budget, may escape public financial management system • Ghana: 57% of total planned spending in MoAg in 2007 financed by donor sources • Uganda: donor support 55% capital spending in Ag sector in 2005/06 • Hinders analysis on how sources of financing correlate with effectiveness, coordination with other PE, or congruence with government stated priorities

18. Assessing Impact of Decentralization Unclear • Local control and accountability tends to improve social expenditure(ed, health, drinking water, etc.) but can complicate assessment • Decentralization affects horizontal as well as verticalrelations in PE, less good for some growth-oriented exp. & subject to spillovers (research, ext, roads...) • Revenue collection mechanisms under decentralization are key—but can distort incentives—eg Tanzania later 1990s & are also harder to assess

19. Approach of the Partnership • Build on overall PER approaches but go in more depth for ag • 6 ag country case studies discussed tomorrow for eventual synthesis of insights • Explore available tools, including from other sectors • A work in progress

20. Tools

21. Ongoing ARD/DfID Approach to Ag PER Tools • Assessment of tools for Ag-PER, such as Public Expenditure Tracking Surveys (PETS) • Options/sources for using IT for PE M&E • Experiences outside agriculture • Monitoring systems such as Report Cards • Templates & software • Drawing on what has been done inside and outside Ag PER • Website as an interactive resource base • The Tool Kit (day 2)

22. Website Resource • See http://ard (internal) or http://www.worldbank.org/ard (external) • Follow sidebar link to APEA page • Info on partnership • Info and reference links to MTEFs; PER (and PREM site generally); PETS; Qualitative Service Delivery Surveys; Incidence Analysis and Gender Budgeting • Links to all WB Ag PER work we could find • Links to selected work by other organizations • Info and selected links to work on ag and decentralization of PE • Hopefully a living resource—send updates/comments/suggestions

23. The Practioners’ Tool Kit • Core components: • Preparation • Analysis • Diagnosis in reporting • Framework and strategy components • Dissemination and implementation • Work in progress • Details tomorrow